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Suppose the demand and supply curves of a Commodity-X is given by the following two equations simultaneously: Qd = 200 - p Qs =50 + 2p (i) Find the equilibrium price and equilibrium quantity. (ii) Suppose that the price of a factor of production producing the commodity has changed, resulting in the new supply curve given by the equation Qs' = 80 + 2p Analyse the new equilibrium price and new equilibrium quantity as against the original equilibrium price and equilibrium quantity. |
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Answer» Solution :(i) We know that the equilibrium price and quantity are achieved at, Qd = OS 200 - p = 50 + 2p (-) 3p = (-) 150 Therefore, Equilibrium Price p = 50 And, Equilibrium Price P = 50 And, Equilibrium Quantity q= 200 - 50 = 150 units (iii) If the price of factor of production has changed then under the new conditions, Qd = Os 200 - p = 802p (-) 3p = (-) 120 Therefore, Equilibrium Price p = 40 And, Equilibrium Quantity q = 200 - 40 = 160 units As, Intercept on X-axis of Supply equation , Os = 50 + 2p is 50 [By Putting Price (P) = 0] andIntercept on X-axis of supply equation, Os. = 80 + 2p is 80 [ By Putting Price (p) = 0 ]. Since, Intercept of X-axis INCREASES, Supply curve shiftsRightward as shown below: SO, equilibrium price falls from ₹ 50 to ₹40 and equilibrium Quantity rises from 150 units to 160 units. ` (##FM_M_ECO_XII_P1_C12_E02_070_S01.png" WIDTH="80%"> |
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